Question: Question# 1 ( Segmented Reporting) ABC Company provides the following information for their three divisions (A, B, & C) A B C Total Sales $
Question# 1 (Segmented Reporting)
ABC Company provides the following information for their three divisions (A, B, & C)
|
| A | B | C | Total |
|
|
| Sales | $ 500,000 | $300,000 | $900,000 | $1,700,000 | 100% |
|
| Variable exp. | 350,000 | 210,000 | 630,000 | 1,190,000 | 70% |
|
| Contribution margin | $ 150,000 | $ 90,000 | $270,000 | $ 510,000 | 30% |
|
| Fixed exp. | 100,000 | 75,000 | 75,000 | 250,000 |
|
|
| Common costs * | 29,500 | 17,500 | 53,000 | 100,000 |
|
|
| Operating income | 20,500 | (2,500) | 142,000 | $ 160,000 |
|
|
* rounded to the nearest $ 00s
ABC asked you to look into their Divisional performance. They provide the following information:
There are two products sold by each division Tonkas and Wonkas. They each represent 50% of the total sales for their division. However, variable costs for Tonkas are 75% of sales and Wonkas are 65% of sales for each product line. Traceable fixed expenses for Tonkas and Wonkas are provided for each division. Common costs for each division are allocated based on divisional revenues rounded to the nearest $ 00s.
Required:
Prepare a segment margin format income statement for each Division, and the total for all divisions. Comment on the performance of each Division.
Should the company drop any Division? Give quantitative reasons why/why not?
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